If you’ve got good comps that show the value is actually $35k or more, you could talk to a private lender and borrow 50% of the equity, and call it ‘all the money your mom’s gonna get.’ It will probably be a high-rate loan, because it’s high risk. The costs of foreclosure are the same on a $35k house as they are on a $135k house.
As a result, conventional lenders probably won’t make a loan that small, because there’s not enough profit, and the downsides are tremendous.
Your mom has already said no to notes and carry back, but frankly, that’s the mostly likely way you can physically pay her off.
I would say, "Mom, pull your head out. Do you want to get paid $20k anytime soon, or do you want to throw me out of the house, make a bunch of repairs, and pay a real estate agent to sell this house, who’ll also demand a minimum of $10,000 to screw with this cheap hell hole?
If you want the twenty grand, then you need to deed the house to me, set up payments with me, and after twelve months of making on-time payments, I’ll find a bank who’ll refinance my loan to you for $20,000, and you can have all your money without making repairs and paying agents.
NOTE: The reason you want to get the deed and make payments, is that refinancing something you own is way EASIER than getting a new purchase money mortgage (especially on a sub-prime property, and with iffy credit). You need to be able to show a tax return demonstrating your ability to make payments.
I’m guessing that you’re not paying your mom rent on the present house, and making payments on a $20k note is gonna be a tough nut to crack, especially since you’re not working full time.
You might consider renting out rooms, and scaring up some additional income, for the sole purpose of qualifying for a refinance later.
Meantime, you’ve got to show at least 12 on-time payments (dated checks, payments stubs, bank statements, etc.)
Never mind you might need to get a partner with credit to help you qualify for financing???
BTW, something that few people appreciate, much less use, and that’s a note servicer. They can handle the payments you’re making to your mom, provide a payment history, report interest paid to the IRS, and provide an income statement for your mom. It costs about $150 to set up, and probably $15/mo to maintain.
That’s my take.